Correlation Between Xinxiang Chemical and Dezhan HealthCare

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Can any of the company-specific risk be diversified away by investing in both Xinxiang Chemical and Dezhan HealthCare at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Xinxiang Chemical and Dezhan HealthCare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xinxiang Chemical Fiber and Dezhan HealthCare Co, you can compare the effects of market volatilities on Xinxiang Chemical and Dezhan HealthCare and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Xinxiang Chemical with a short position of Dezhan HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinxiang Chemical and Dezhan HealthCare.

Diversification Opportunities for Xinxiang Chemical and Dezhan HealthCare

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Xinxiang and Dezhan is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Xinxiang Chemical Fiber and Dezhan HealthCare Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dezhan HealthCare and Xinxiang Chemical is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Xinxiang Chemical Fiber are associated (or correlated) with Dezhan HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dezhan HealthCare has no effect on the direction of Xinxiang Chemical i.e., Xinxiang Chemical and Dezhan HealthCare go up and down completely randomly.

Pair Corralation between Xinxiang Chemical and Dezhan HealthCare

Assuming the 90 days trading horizon Xinxiang Chemical Fiber is expected to under-perform the Dezhan HealthCare. But the stock apears to be less risky and, when comparing its historical volatility, Xinxiang Chemical Fiber is 1.32 times less risky than Dezhan HealthCare. The stock trades about -0.26 of its potential returns per unit of risk. The Dezhan HealthCare Co is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  382.00  in Dezhan HealthCare Co on October 12, 2024 and sell it today you would lose (69.00) from holding Dezhan HealthCare Co or give up 18.06% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Xinxiang Chemical Fiber  vs.  Dezhan HealthCare Co

 Performance 
       Timeline  
Xinxiang Chemical Fiber 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Xinxiang Chemical Fiber are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinxiang Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.
Dezhan HealthCare 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Dezhan HealthCare Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dezhan HealthCare sustained solid returns over the last few months and may actually be approaching a breakup point.

Xinxiang Chemical and Dezhan HealthCare Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Xinxiang Chemical and Dezhan HealthCare

The main advantage of trading using opposite Xinxiang Chemical and Dezhan HealthCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xinxiang Chemical position performs unexpectedly, Dezhan HealthCare can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dezhan HealthCare will offset losses from the drop in Dezhan HealthCare's long position.
The idea behind Xinxiang Chemical Fiber and Dezhan HealthCare Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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